Using US data, we estimate optimal policy with a probability below one that the Fed reneges on its commitment ("limited credibility") versus discretionary policy where the Fed reneges on its commitment at all periods with a probability equal to one ("zero credibility"). The transmission...

This paper compares different implementations of monetary policy in a new-Keynesian setting. We can show that a shift from Ramsey optimal policy under short-term commitment (based on a negative feedback mechanism) to a Taylor rule (based on a positive feedback mechanism) corresponds to a Hopf...

This paper reports on the deliberations of a special plenary panel session organised on behalf of the UK?s Monetary Macro, Finance Research Group (MMFRG) at the 31st International Symposium of the Groupement de Recherche Européen (GdRE) : Monnaie, Banque et Finance (MBF) on 19th June 2014 in...

This paper shows that rules of optimal policy under commitment allow policymakers to lean against bubbles and to stabilize an unstable economy. In this framework, policymakers anchor the initial values of the expectations of the private sector. Then, this paper sets identification conditions for...